Innovation Fund Expert Group meeting 18 December …...TO JOIN: 1. Take out your smartphone, tablet or computer and open your browser 2. Go to Slido.com and enter the event code #IFEG

Innovation FundExpert Group meeting

18 December 2019

Agenda

Innovation Fund Tour 2019

Basics Project selection

GovernanceHow to calculate GHG emissions

avoidance

How to calculate relevant costs

and cost efficiency

How to co-finance projects

Preview of next meetings

Slido

During the event, Slido will be used for:

short surveys

submit your questions and comments

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1. Take out your smartphone, tablet or computer and openyour browser

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Agenda

Innovation Fund Tour

2019Basics Project selection


avoidance


and cost efficiency



From May to

December 2019

17 workshops with industry

sectors

12 workshops with Member

States

1000+ participants

180+ projects


Steel, Chemicals, Waterborne, Paper, Cement, Solar, Wind, Ocean, Carbon Capture and Storage, Bioenergy, Refineries, Fertilizers, Carbon Capture and Use, Geothermal, Hydrogen, Ceramics, Circular Economy

Belgium (Leuven), Netherlands (The Hague), Austria (Vienna), Sweden (Stockholm), Slovenia (Ljubljana), Italy (Rome), Denmark (Copenhagen), Spain (Madrid), Ireland (Dublin), Czechia (Prague), France (Paris)

Key facts

Tour 2019

*Renewable energy: wind, solar, ocean, hydro, geothermal, bio*Fuel switch: to renewable energy source (incl. RES H2, electricity, biogas)*Other sectors: non-ferrous metals, mineral wool, gypsum

Overview of Projects

Tour 2019Industrial Cross-Sectoral Projects

Agenda




avoidance


and cost efficiency



Key features Basics

Volume of at least EUR 10 billion at current carbon

prices

Support of up to 60% of additional costs related to

innovative technology

Renewable energy

CCS and CCU

Industry

Storage

Financed from the revenues of the EU Emissions Trading

System

Support of additional capital

and operating costs (up to 10 years)

First call in mid-2020

Selection process Basics

Greenhouse gas emissions avoidance

Degree of innovation

Project maturity

Scalability

Cost efficiency

Technical, business, financial viability

Selection process

(a) GHG emissions avoidance

(b) Degree of innovation

(c) Project maturity

Award of Project

Development Assistance

(PDA)

Award of project grants

(a) GHG emissions avoidance

(b) Degree of innovation

(c) Project maturity

(d) Scalability(e) Cost efficiency

Expression of interest

Full application

List of pre-

selected projects

to be consulted with MS

Criteria (a), (b), (c) are met

Criteria (a) and (b) are met

Basics

Entry into Operation

Financial Close

Grant Award

ConstructionFeasibility

Study

Up to 40%

FEED

independent of achieved emissions

avoidance

depending on verified emissions avoidance

Add'l project milestones

Annual instalments

Reporting period

3 to 10 years

At least 60% Payments

Grant disbursement Basics

Choose your speed! Basics

Fast lane Classic PDA first

Contracts ready to be signed

Mature project but not fully

ready

Promising but immature project

Financial close

Grant award PDA award year xGrant award

year y

x+4

y+4

Grant award

Max 4 years to achieve financial close from grant award

Financial close

Financial close

SLIDO poll Basics

How fast will projects be implemented?What are your expectations?

Fast lane Classic PDA first

Innovation Fund vs Horizon 2020

Innovation Fund Horizon 2020

Build and operate large-scale industrial assets with breakthrough technologies

Objective Research programme

Single entity, i.e. international consortia not

requiredApplicants

At least 3 legal entities from at least 3 Member States

Technical, business, and financial viability

Selection criteria

Focus on research

Lump-sum payments upon milestones and

performance (verified GHG emissions avoidance)

Disbursement of grant

Upon final report and approval of the eligible costs

Contents and conditions of calls can be adjusted

annuallyCalls Seven-year work programme

Basics

Agenda


BasicsProject

selection


avoidance


and cost efficiency



First call in 2020First ideas

Your views please

• Projects with capital expenditure > EUR 7.5 million

Scope

Q4 21

Q2 21

Q1 21

June 20

Sep 20

Expected timeline (tbc)

Launch of first call

Submission deadline for first phase

Award of Project Development Assistance

Invitation for second phase

Award of grant

Submission deadline for second phase

First ideas

Your views please

Q1 21

•Start of final preparations for first call

Expert group

18 December

•Deep dive on calculations

•GHG emissions avoidance

•Cost efficiency

Workshop

5-6 February

•Deep dive on project selection, co-financing, and grant management

Workshop

2nd weekMarch

•Summary of technical work

Expert group

April

Preparations for first callFirst ideas

Your views please

Technical experts

Financial experts

First-phase selection criteria Expression of interest

GHG emissions avoidance• To be delivered

during first 10 years of operations

Degree of innovation• Breakthrough

technologies

•Consistency with 2050 climate-neutrality vision

•Quantitative indicators

Project maturity• Readiness to

invest

• 1 = feasibility study

• 100 = "conditional investment decision"

First ideas

Your views please

GHG emissions avoidance

• Amount of renewable energy produced (as NER300) OR

• Avoided GHG emissions

Renewables

(2 options)

• Emissions reductions compared to GHG emissions of ETS benchmark installation

Energy intensive industry

• Amount of energy stored OR

• Avoided GHG emissions

Energy storage

(2 options)

First ideas

Your views please

At least 75% need

to be delivered to receive full grant


• Technologies are innovative in relation to the state-of-the-art

• Technologies should not yet be commercially available

Breakthrough technologies

• 2050 climate neutrality - "Clean Planet for all"

• SET-plan

Consistency with EU policy

objectives

•GHG emissions avoidance based on expected 2050 electricity mix

• Carbon intensity

• Resource and material efficiency

Key performance

indicators

First ideas

Your views please

Three steps

Project maturityFirst ideas

Your views please

1 100

"Conditional" final

investment decision

Feasibility study

Due diligence report

certified by third party

Commitments by investors

Permits clearedFEED study

finished

Business plan

Exemplary checklist – to be further developed

Support by Member

State

Stylized selection tree for 1st phaseFirst ideas

Your views please



Is the project

promising?

Is the project

mature?

Project maturity

OUT Project Development

Assistance

2nd phase –Full

application

Yes

No YesNo

SLIDO poll

Which of the three selection criteria is most important for you?

First ideas

Your views please

Project maturityGHG emissions

avoidanceDegree of innovation

Questions

How sophisticated should be the GHG emissions avoidance calculations?

What are good (quantitative) indicators for degree of innovation?

How to best judge project maturity? Which documents should be requested?

First ideas

Your views please

Two additional criteria for full application

First ideas

Your views please

Scalability• Market potential in a

2050•Number and scale of

applications

•Expected cost reductions

•Resource availabilities

Cost efficiency•Requested grant in

relation to promised GHG emissions savings

Cost efficiency

• Additional capital expenditure +

•Net present value of additional operating costs and benefits over 10 years after entry into operations

Relevant costs

•Reference plant OR

• Price (e.g. LCOE)

Benchmark for

additionality

•Weighted average cost of capital (WACC)

• Past average carbon price as conservative estimate

Risks and costs

calculations

First ideas

Your views please

Cost efficiency =First ideas

Your views please

Requested grant (up to 60% of relevant costs)

Expected GHG emissions avoidance

=

How aggressive or conservative do you want

to bid?

Second-phase selection process Stylized step 1

First ideas

Your views please

• VV pointsGHG emissions avoidance

•WW pointsDegree of innovation

• XX pointsProject maturity

• YY pointsScalability

• ZZ pointsCost efficiency

1st

Ranking of projects within a sector based on (weighted) sum of points

2nd 3rd 4th ..

Second-phase selection processStylized step 2

First ideas

Your views please

Which rule to apply to rank acrosssectors?

Sector A

•1st

•2nd

•3rd

•4th

Sector B

•1st

•2nd

Sector C

•1st

•2nd

•3rd

SLIDO pollFirst ideas

Your views please



Project maturity

Scalability

Cost efficiency

Which of the five selection criteria is most important for you?

Second-phase selection Questions

Can a cost calculation based on average carbon price (e.g. from past two years) be an effective means to reduce the carbon price risk?

What are good (quantitative) indicators for scalability (complementary to degree of innovation)?

Should the submission of a due diligence report by a third party (e.g. financial institution) be a binding requirement?

How to rank projects across sectors?

First ideas

Your views please

Agenda




avoidance


and cost efficiency



INEA's Programmes

Horizon 2020

€33.9 billion 300 staff 1500+ ongoing projects

Promoting funding opportunitiesLaunch of Call for ProposalsInfo Day

EvaluationManagement & support to Commission selection

Providing information and support to beneficiaries

Administering the grants awarded

Providing technical and financial follow-up of project implementation

Project Management/Coordinator workshops

Promoting achievements, results & successes

Providing feedback to policy-making

WHERE? FUNDING & TENDER OPPORTUNITIEShttps://ec.europa.eu/info/funding-tenders/opportunities/portal/screen/work-as-an-expert

EU ETS Innovation Fund: https://ec.europa.eu/clima/policies/innovation-fund_enINEA: https://ec.europa.eu/inea/en

PRO

FIL

ES

WHEN? LAUNCH OF THE CALL FOR EXPERTS EARLY 2020

External experts: bring your expertise!

experience in engineering and innovative technologies in the sectors covered by the fund

experience in project finance, investment banking, financial analysis and risk analysis in the sectors covered by the fund.

TECHNICAL EXPERTS

FINANCIAL EXPERTS

HO

W T

O A

PPLY

A call for expressions of interest will be launched to establish a pool of experts

JOB DESCRIPTION

Evaluate innovative investment proposals;

Follow-up and support the implementation of selected projects;

Provide opinions and advice in specific casesEVALUATION SETTINGS:

Individual and Team work: remote phase (individual evaluation) + central meeting in Brussels to agree on a consensus report (travel, accommodation and daily allowances included)

Experts per proposal: 3-5 evaluators + 1 rapporteur drafting the report;

Effort required: 2-3 weeks/year (flexible working time, dependent on number of projects);

Access to information subject to confidentiality and conflict of interest provisions in the contract.

DESCRIP

TIO

N

https://ec.europa.eu/info/funding-tenders/opportunities/portal/screen/work-as-an-expert

https://ec.europa.eu/clima/policies/innovation-fund_en

https://ec.europa.eu/inea/en

WHERE?https://ec.europa.eu/inea/en/mission-objectives/job-opportunities s

https://ec.europa.eu/inea/en/mission-objectives/job-opportunities

PRO

FIL

ES

WHEN? LAUNCH OF THE VACANCY NOTICES EARLY 2020

INEA recruits – join us!H

OW

TO

A

PP

LY

JOB DESCRIPTION

• Specific expert teams following the covered sectors and led by senior projectmanagers

• Direct outreach activities, contact with industry and market;

• Organise the launch of calls for proposals and evaluation phases;

• Negotiate grant agreements, manage the portfolio of projects and support fundedprojects in a timely manner;

• Provide further assistance especially on financial structuring;

• Monitor, communicate and exploit results.

DESCRIP

TIO

N

PROJECT MANAGERS experience in engineering and innovative technologies indifferent sectors.

FINANCIAL MANAGERS

LEGAL ADVISERS

experience in project finance, investment banking, financialanalysis and risk analysis

expertise in EU law, with strong knowledge of EU programmemanagement

https://ec.europa.eu/inea/en/mission-objectives/job-opportunities

European Investment Bank – An overviewEU's long-term lending institution – a public bank with objectives driven by EU-policies

€ 55.6bn

Innovation Environment Infrastructure SMEs

€ 13.5bn € 15.2bn € 12.3bn € 23.3bn

4 key priorities:

EIB lending to the energy sector• EUR 13bn per year (2014-2018)• Energy represented 18-20% of EIB lending• c. 85% of energy lending inside EU

Energy Efficiency;

26%

Renewables; 34%

Electricity Grids, 22%

Gas (inc. storage, LNG), 13%

Other; 4%

EIB’s Value AddedExtensive expertise in financing and supporting

complex infrastructure projects and their investors throughout the project cycle

Identification Appraisal ApprovalFinance Contract

Monitoring (Physical, Financial)

Strategy, Master plan

Feasibility Studies

Project Preparation

Financial Close

Tendering Construction Operation

1st stage - Expression of Interest (EoI)

2nd stage – full application

Grant Agreement

Financial Close

Implementation Operation

Standard EIB funding & appraisal process

Project Proponent’s investment process

Innovation Fund process

UPSTREAM

- Advice to a promoter in strategic investment planning

- Assessment of promoter’s project portfolio

- Project quality assessment, first reactions

v

PREPARATION

- Drafting ToR and supervising consultants preparing projects

- Advice on structuring projects

IMPLEMENTATION

- Advice to a promoter/PIU on project implementation

- Enhanced monitoring to mitigate implementation issues

v

EIB

AD

VIS

OR

Y

EIB ADVISORY

PDA

EIB

AD

VIS

OR

Y

Examples of EIB’s advisory expertiseEnergy sector

€ 2.2 bn• technical and financial due

diligence, project selection, ranking

• 110 highly innovative, complex projects assessed

• 42 awarded

€ 300 mn

ELENAEuropean Local Energy Assistance

• Closing funding gap• financial and technical

assistance to improve the bankability

• >300 projects assessed

€ 150 mn• Technical assistance and grants

to support public and private entities to prepare their energy saving investment programmes

• 85 projects assessed, energy efficiency measures, building integrated renewables

42

Project Development Assistance (PDA)For non-mature projects

PDA Award

The aim of PDA is to enable non-mature projects to apply

for a grant in a subsequent call

Consultant Choice EIB advisory

PDA Grant awarded following 1st stage

evaluation

OPTION 1• PDA carried out by pre-

selected panel of consultants procured by EIB (Framework Contract)

OPTION 2• Projects proponents select

their own consultants paid for by PDA Grant

• Procurement in line with EIB’s guide to procurement

• Draft ToRs• Launch Call for Tender under

Framework• Review bids and select

consultants• Supervision, co-ordination,

monitoring and contract management

• Approve all deliverables

• Review ToRs• Ensure EIB’s procurement

guidelines have been followed• Confirm non-objection to

selected candidate• Draft and sign PDA Grant

agreement• Approve all deliverables

Agenda



Governance

How to calculate GHG

emissions avoidance


and cost efficiency




•Avoided GHG emissions compared to GHG emissions of ETS benchmark installation

Energy intensive industry

•Amount of renewable energy produced (as NER300) OR

•Avoided GHG emissions: 3 options: detailed, simplified or within project boundaries

Renewables

(2 main options)

•Amount of energy stored OR

•Avoided GHG emissions: 3 options: detailed, simplified and simplified but based on EF of energy charged

Energy storage

(2 main options)

•Avoided GHG emissions: 3 options: detailed, simplified or within project boundaries

Carbon capture and Storage

First ideas

Your views please

JRC presentation

How to calculate GHG emissions

avoidance?

ICF presentation

How to calculate GHG emissions

avoidance?

Agenda




avoidance

How to calculate

relevant costs and cost efficiency



Relevant cost calculation

• Additional capital expenditure +

•Net present value of additional operating costs and benefits over 10 years after entry into operations

Relevant costs

•Reference plant OR

• Price (e.g. LCOE)

Benchmark for

additionality

•Weighted average cost of capital (WACC)

• Past average carbon price as conservative estimate

Risks and costs

calculations

First ideas

Your views please

ICF presentation

• How to calculate relevant costs?

• State aid considerations

Agenda




avoidance


and cost efficiency



EU Energy Transition Funds: From Lab to Market (2021-2027)

Proof of concept

Pilot Demo Scale up Roll out

Horizon Europe๏European Research Council (Proof of Concept)๏European Innovation Council๏Pillar II: Climate Energy and Mobility; Digital and Industry๏EIT: InnoEnergy, Climate KIC, KIC Raw Materials๏Breakthrough Energy Ventures Europe

CEF Energy & Transport Infrastructure

ERDF & Cohesion Fund A greener, carbon free Europe

Innovation Fund๏CCUS๏Energy Intensive Industries๏Renewables๏Storage and Grid

LIFE Mitigation Projects

Invest EU๏Sustainable Infrastructure๏Research, Innovation and Digitalisation๏SMEs๏Social Investment and Skills

Type of funding

Target Beneficiary

Start-ups

Large companies

SMEs

Public bodies

Loan Grant

Equity Advisory

Source: DG CLIMA & InnoEnergy. Information on the slide is indicative and not legally binding

EU Programmes beyond 2021

How to co-finance Innovation Fund projects

Innovative demonstration

projects at(pre-)commercial

scale

Budget

Up to € 700 million

Portfolio

• 6 projects

• €171m EU support(loan/equity-type)

• €353m project costs

Scope• Renewable energy

• Smart energy systems• Energy storage• Carbone Capture

Utilisation & Use

Incl. manufacturing plants

ElcogenEUR 12m

Use of unspentNER300 funds

InnovFin EDP

European Innovation Council


Breakthrough Energy Ventures

€100 million fund

o 50+50 pari passu between the Commission and BEV

Targets European companies developing breakthrough innovations on climate mitigation

Sectors: energy, transport, buildings, industry, agriculture

Possibly open to additional investors after first closing

Expected launch: Q1 2020


EUR 38 bn EU budgetary guarantee to be used for debtand equity financing for bankable investments

Four thematic policy windows

Specific financing products geared to level of risk

Up to 95% FLP coverage possible for very risky projects, injustified cases possible to start with 100% coverage


InvestEU – how does it work

Windfloat project

Combination of NER300 grant and InnovFin EDP loanhttps://www.youtube.com/watch?v=PiKa6steniw

• NER300 grant: EUR 30 million• InnovFIn EDP loan: EUR 60

million• Portuguese carbon fund: EUR 6

million• Additional FIT/state aid

25MW floating offshore wind farm around 20km off the coast of Portugal in 85-100m water depth

https://urldefense.com/v3/__https:/www.youtube.com/watch?v=PiKa6steniw__;!NW73rmyV52c!XvOtECWbqT_o-p0y6C0GCVChkphV7Js23Ums3qwpTPNuNtfWgSSloMxbBkSHcrmrF_GMfNduuF-k4N8$

Tota

l CAPEX

Project financial

structure

Innovation

Fund

IF g

rant

InvestEU

Additio

nal costs

Invest

EU

lo

an

+

Innovation Fund grant + InvestEU loan (stylized example)

IF grant max 60% of additional costs

InvestEU financing max 50% of total costs

=

IF + InvestEU

Invest

EU

lo

an

IF g

rant

Combined financing

Questions

What additional type of funding would you seek to financially close your project?

Would you need specific assistance with financial structuring of your investment? Any other assistance needed?

How could Member States help best?

First ideas

Your views please

Agenda




avoidance


and cost efficiency



•Deep dive on calculations

•GHG emissions avoidance

•Cost efficiency

Workshop

5-6 February

•Deep dive on project selection, co-financing, and grant management

Workshop

2nd weekMarch

•Summary of technical work

Expert group

April

Next meetings

Technical experts

Financial experts

• GHG emissions avoidance

• Relevant costs and cost efficiency

• Exemplary calculations for projectsTopics

• Concept paper to be published two weeks in advance

• Each stakeholder should nominate at max two technical experts

In-depth discussions in

break-out groups with technical

experts

•Open through web-streaming and Slidoto all – no limit of participation

•Report back from break-out groups

•Q&A session

Plenary session

Deep dive on calculationsWorkshop 5-6 February

Deep dive on project selectionWorkshop in 2nd week of March

• How to evaluate technical, business, and financial viability?

• What is the value of a due diligence report?

• How to best check the criteria of innovation and scalability?

Project selection

• How do public and private investors evaluate projects?

• How to best team up with other investors and public authorities?

Co-financing and reaching out to

financial institutions

• Definition of milestones for grant disbursement

• Knowledge sharing

Grant management

Please support us to mobilize …

Technical experts

Workshop "Deep dive on calculations"

5 and 6 February

Financial experts and institutions

Workshop "Deep dive on

project selection, co-financing, and

grant management"

2nd week of March

Technical and financial experts

Experts for project

evaluation

Project managers at

INEA

Documents

Innovation Fund Expert Group meeting 18 December …...TO JOIN: 1. Take out your smartphone, tablet or computer and open your browser 2. Go to Slido.com and enter the event code #IFEG